Question

Saved Required Information Use the following information for the Exercises below [The following information applies to the questions displayed below.) BMX Company has one employee, FICA Social Security taxes are 6.2% of the first $128.400 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, Its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to its employees Gross Pay through Exercise 9-7 Payroll-related journal entries LO P3

Answer 1

Employer Payroll taxes	September earnings subject to tax (a)	Tax rate (b)	Tax Amount (a x b)
FICA – Social Security tax	$2,100	6.20%	$130.20
FICA – Medicare tax	$2,100	1.45%	$30.45
FUTA       [($7,000 - $5,000) or $2,100 whichever is lesser]	$2,000	0.60%	$12.00
SUTA       [($7,000 - $5,000) or $2,100 whichever is lesser]	$2,000	5.40%	$108.00
Total Payroll Taxes Expense			$280.65

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Journal entry to record the Employer’s payroll taxes and its related payroll liabilities
No.	Date	General Journal	Debit	Credit
a	Sept. 30	Payroll Tax Expense	$280.65
		FICA - Social Security tax Payable		$130.20
		FICA - Medicare tax Payable		$30.45
		Federal unemployment taxes Payable		$12.00
		State unemployment taxes Payable		$108.00
		(To record payroll taxes and related payroll liabilities)

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Note: 1 - FICA Social Security's tax FICA - social security tax is payable on maximum wages of $128,400. Once an employee's year to date earnings or cumulative earnings exceed the wage base of $128.400, no additional Social Security tax is to be withheld from the employee's earnings. So, before calculating the FICA - social security tax, we have to check whether the September earnings along with cumulative earnings until August is exceeding $128,400 or not. If September earnings + cumulative earnings until August is exceeding $ 128,400, then Social Security tax= [($128,400 - Cumulative earnings until August) or gross salary whichever is lesser] x 6.20%. and if it is not, then Social Security tax = Gross pay during September x 6.20% Note 2 - FICA - Medicare tax Medicare tax is always payable on gross pay. Medicare tax = Gross pay x 1.45%

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Note 3 - FUTA and SUTA taxes *Maximum salary subject to FUTA tax & SUTA tax is $7,000. FUTA tax: If September earnings + cumulative earnings until August is exceeding $7,000, then FUTA tax= [($7,000 - Cumulative earnings until August) or gross salary whichever is lesser] x 0.6%. and if it is not, then FUTA tax = Gross pay during September x 0.6% SUTA tax If September earnings + cumulative earnings until August is exceeding $7,000, then SUTA tax = [($7,000 - Cumulative earnings until August) or gross salary whichever is lesser] x 5.40%. and if it is not, then SUTA tax = Gross pay during September x 5.40% Once an employee's year to date earnings exceed the wage base of $7.000, no additional FUTA tax & SUTA would be payable by employer.